Scandals, inequality loom large as Costa Rica votes for new leader

SAN JOSE, Feb 2 (Reuters) - Costa Rica's centrist rulingparty front-runner seeks to fend off a leftist surge fueled byvoter resentment over government corruption scandals and risinginequality as voters in Central America's second-largest economyhead to the polls on Sunday.

Centrist former San Jose Mayor Johnny Araya is leading onpromises to reduce poverty, while distancing himself fromPresident Laura Chinchilla's scandal-plagued government andpainting rivals as radicals.

But voter anger over government corruption has buoyed achallenge from leftist lawmaker Jose Maria Villalta, who alsopromises to tackle inequality in the coffee-producing nation.

If none of the thirteen candidates wins more than 40 percentof votes, as expected, there will be an run-off in April foronly the second time in Costa Rican history.

A winner will have to tackle growing debt that totals morethan half of gross domestic product, as generous salaries andmandatory education spending weigh on a weak tax take.

"If they don't do something, then this somewhat negativetrend on the debt could continue and that could have an impacton the credit rating," said Joydeep Mukherji, a sovereign creditanalyst with Standard & Poor's, which rates Costa Rica at BBwith a stable outlook.

Villalta told Reuters on Saturday he would seek to addressthe problem by combating waste, tax evasion, and lightening aheavy burden on the middle class if he wins.

"What we want is a progressive reform with greater taxfairness where those who have more pay more," he said.

A lawyer by training, Villalta, 36, cut his teeth organizingagainst the Central American Free Trade Agreement.

He is the only member of his Broad Front party, formed in2004, to serve in Congress during the 2010-14 term. But heproposed more than 100 bills, including one to strip high-levelofficials of immunity while in office.

Araya, 56, has also promised to tackle the deficit bylimiting public sector bonuses, creating a capital gains tax andshifting to a value added tax.

The National Liberation Party frontrunner won praise forpublic art projects during his 22 years as mayor, but he hasfaced criticism for an autocratic style.

Gaffes, like underestimating the price of milk in aninterview, have distanced Araya from equality-conscious voters,while the national prosecutor's probe of allegations of abuse ofauthority and embezzlement have also dampened his appeal.

"(Araya) has done nothing as mayor. He is not qualified torun a country," said Cesar Diaz Badilla, 33, a call centerworker.

But some centrist voters prefer Araya to unknown figureslike Villalta, dubbed by critics as Costa Rica's version ofVenezuela's late socialist leader, Hugo Chavez.

"I'm not for Liberation, but with them we more or less knowwhat we are getting," said Rafael Vargas, who drives a cab inCosta Rica's second city of Alajuela. "With Villalta ... anotherVenezuela could be waiting for us."